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Home Sales Fell Again in December

Sales of existing homes fell in December for the third consecutive month, a trade group reported yesterday, even as the housing market registered a fifth consecutive year of increased sales.

The data appear to suggest that the era of rapidly increasing sales may be coming to a close. Sales in December fell 5.7 percent, to an annual pace of 6.6 million homes, after a 1.3 percent dip in November and a 2.7 percent drop in October. It was the lowest level of sales since March 2004.

Sales of existing homes fell or stayed flat in all four regions of the country, while the total inventory of homes for sale dipped slightly, the National Association of Realtors reported. Median prices -- half the homes sold for less, half for more -- were up 10.5 percent, to $211,000, from a year earlier.

For the year, home sales grew 4.2 percent, to 7.07 million, setting another record. The nation's long housing boom is almost a decade old, with the exception of 2000, when sales fell by 0.4 percent.

"The housing boom in the United States is over," said Lynn Reaser, the chief economist for Bank of America's investment strategies group. "It at this point appears to be on the soft-landing plane, with sales slowing, some growth of inventory and sellers not receiving their full asking price."

The economy has become increasingly dependent on the growth generated by home sales, mortgage refinancings and related spending. A housing slowdown is figuring prominently into many analysts' forecasts for slower economic growth in 2006.

But forecasters have pronounced an end to the boom before and were proved wrong. Mortgage interest rates, though higher than a year ago, remain near historical lows, making home ownership more affordable for many. The average interest rate on a 30-year fixed mortgage was 6.1 percent last week, up from 5.71 percent in January 2005, according to Freddie Mac.

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Economists say the sharpness of the current slowdown, and whether it will become more severe, will not become clear until the peak spring and summer home-buying season.

Prices in markets on the coasts that have experienced sharp increases will be an important barometer for the housing market this year, along with mortgage delinquencies and foreclosures, said Dean Baker, co-director of the Center for Economic and Policy Research. Prices, though still higher than a year ago, did not rise as fast in December as they did earlier in 2005.

Officials with the Realtors' group said a fundamentally strong economy and housing demand would help keep home sales generally steady, but even they acknowledged that the market had changed. "Clearly the air is coming out of the balloon," David A. Lereah, chief economist for the Realtors association, said, according to Bloomberg News. "We're transferring from a sellers' market to a buyers' market." The association expects sales to drop 4.4 percent in 2006.

December sales dropped the most in the West, 11.4 percent, followed by the South at 7.2 percent and the Midwest at 2.6 percent. Sales activity in the Northeast was unchanged from November.

Nationwide, the number of homes available for sale dropped to 2.8 million at the end of December, from 2.9 million, but because of the slower pace of sales, that represented 5.1-month supply of homes, up from a five-month supply in November.